We always hear that more than 70% deals fails to achieve the expected deal value and the biggest cause is poor Post-merger integration (PMI). All top corporate executives have faced the challenges of a post-merger integration(PMI) at least once in their Career
When we look at the root cause we realize that the traditional approach towards integration has basics flaws.
With each deal either big or small – comes the challenge of post merger integration (PMI). This is the where most companies really fail to execute well, and it’s usually because they don’t put value creation at the core of there integration strategy.
There are few common mistakes companies make in how they approach PMI:
- Success of deal integration is not directly linked to Value creation. However Successful integration should be defined as achieving the strategic and value creation .Company focus on operational efficiency from day one but they forget the long terms value creation process.
- People part of integration is very subjective and touching and just integrating pay roll system is not going to help.But involvement of new members from acquired company from beginning is key.Most of firms fail to do well here due to many reasons and they do poor job on talent management ,culture alignment, and change management as part of their integration strategy.
- No lesson learnt from the past deals is being used on ongoing deals and mostly due to the fact that organisation in absence of dedicated purpose build M&A platform not been able to capitalise the lesson learnt at centralized location within firm.All learnings & lesson learnt goes away as people changes jobs within firm or leave the firm . Lots of handshakes in between from people closing the deals to new Integration management office(IMO) or and business units which will own the task of synergy tracking and realisation. Several times even finding in Due diligence is not even tracked till integration.Lack of M&A skills within organization is also a cause.
- Too much focus on process, checklist and tons of sheets of papers.In reality this can be avoided by firm if they use M&A platforms where they can automate the M&A process that systematizes their M&A process across firm, increase transparency and tracking on progress on integration and team can focus more on value creation.It’s about capturing value and mitigating early risks … the process of course serves these objectives.
Now look at top key imperatives which will give you Post-Merger Integration Success
Set yourself to win in first step : Integration begins during decision making
- Define integrations principles—the objectives and philosophy of the merger—and right design the PMI to reflect them
- Find the right leadership teams starting with Integration Manager and with mindset that PMI is not part time job.Make sure to have integration talent on hand and ready.
- Design your PMI to reflect Value creation, synergies and early risks.Remember the details are the foundation of Solid planning.
Set the principle on” Capture the Value”
- Understand the basics principles of capturing the Value VS creating value.
- Maximize cost synergies and plan rigorously for revenue synergies.
- Do not forget to capture the cost of Integration.
- Set the overall process to Capture Synergies in steps with focus on “Identifed”-“Secured”-“Realized” with clear roles & responsibilities.
Top-down synergies identified->Bottom up plans to capture->Implement & track->Monitor financial capture.